It is an exaggeration to say that the increase in tax revenue has strengthened the financial position

- Debt relief will be a major challenge in the post-Corona world

The recovery in trade and industry after the country's economy recovered from the Corona effect has resulted in the country's tax collection in the current financial year, especially the GST figure, being much higher than expected. With the increase in tax revenue, the government is expected to be able to control the fiscal deficit to some extent and increase capital expenditure. The government has set a target of limiting the country's fiscal deficit to 7.50 per cent of Gross Domestic Product (GDP) from 5.50 per cent in the current financial year. The increase in tax revenue does not mean that the financial challenges facing the government have been removed, as the debt on the head of government has risen to 40 per cent of GDP and the debt burden as projected by the International Monetary Fund (IMF). By 205, it could be 5 per cent, which would be 10 to 15 per cent higher than the previous level of corona.

Fitch Ratings has maintained a negative outlook for India's ratings with low investment grades. The rating agency Fitch's observation comes in view of the high debt and limited fiscal space of the central and state governments.

During the Corona period, the debt burden of not only India but most of the countries of the world increased. Global public debt is reported to have risen to 100 per cent of GDP by 2020. Developed countries account for more of this debt. Probably a factor as to why they're doing so poorly. When India's debt burden is high, it needs to take necessary steps to alleviate it, if not get out of it, for which it will have to work on several fronts. Steps to cut debt and control deficits may not be feasible as such measures ultimately jeopardize economic recovery.

Rising commodity prices, including crude oil, could push India's growing current account deficit to the country's recovery. The widening trade deficit has raised concerns among the government.

With every increase in global crude oil prices by 10 a barrel, the trade deficit increases by ૨ 15 billion, or 6 basis points to GDP. However, given the high size of India's forex reserves, it is being claimed that there is no risk to macroeconomics. High fuel prices have forced the central government to reduce excise duty on it and at the same time the states have reduced VAT on petrol and diesel. Thus, both the Center and the states will see a decline in tax revenue in the coming days which will disrupt their fiscal arithmetic. After the Corona period, the government will have to work on the revenue as well as expenditure front to accelerate the country's economic growth rate. On the revenue front, the government needs to strengthen the GST system if it wants to maintain or increase the current level of revenue through the Goods and Services Tax (GST). In particular, the GST process needs to be simplified. As the condition of providing compensation to the states against the GST deficit is coming to an end next year, there are fears that the fiscal arithmetic of most of the states will come under strain from this end.

Debt burden of the country which was targeted to reach 20% of GDP by 205-6, but given the current situation, it will take a long time to achieve this target. The fiscal deficit due to Corona is understandable but the increase in public debt is worrisome. The government will have to raise more financial resources to offset the high debt burden. India's economy was already in recession and government debt was rising. The effects of the pandemic have been exacerbated and the government has taken a number of liberal measures in the last one year to boost the country's economy by increasing demand, regardless of debt, and the results will be known in the coming days.

It will be interesting to see how the countries of the world get rid of the debt or how soon the debt burden can be eased in the post-Covid-16 world when the coronavirus has put the countries of the world, including India, in financial trouble. The highest risk of high debt levels is against economic growth. In such a scenario, the country's policy makers will have to aggressively pursue reform programs to accelerate economic growth. While private and public sector spending is likely to remain under control for some time to come, growth through exports alone can be a beneficial policy. Exports to GDP, which was 9 per cent in 2008, fell to 12 per cent in 2020. The government now needs to reverse this trend.

The country's post-Corona fiscal future will depend more on the implementation of the government's policy decisions. In the midst of a changing world in the post-Corona era, a review of the expenditure planned by the Government of India and its redesign has become a prerequisite for the healthy development of the country.